US milk processing industry facing hard times

December 19, 2012

The U.S. milk processing industry has been going through tough times, as a drop in the consumption of milk continues to affect businesses across the entire supply chain. The industry is in crisis and is starting to recognize the fact, Tom Gallagher, CEO of Dairy Management Inc., has admitted.

Dairy Management is a farmer-funded trade group that aims to promote milk products. The organization is aware of the fact that it is losing its market, as consumers opt for energy drinks and vitamin water, the Consumerist reported.

Figures are quite conclusive. The consumption of milk, which had its peak in the United States during World War II, has dropped by a third over the past almost forty years. In 1975 each U.S. resident drank an average of 28.6 gallons per year, whereas milk consumption in 2011 came in at 20.2 gallons, a 3.3% decline from the previous year. The trend is moving downward, even though there has been a rise in consumption of yogurt, cheese and other dairy products.

There are various factors that have contributed to the decline, including a smaller proportion of children among the U.S. population than in previous generations, the rise in popularity of other beverages and the general belief that milk is dense in calories and fat.

In attempt to boost sales of milk, producers and processors have had to come up with innovative ideas to make consumers interested, such as offering smaller and more convenient packages and a range of healthy-lifestyle products like protein-enhanced milk. Two examples of that are Kroger, which has plans to introduce a milk brand called CARBMaster, containing 20 percent more protein and less sugar than conventional milk, and Arizona-based Shamrock Farms Co., which has been selling a variant of its high-protein milk Rockin' Refuel, combining chocolate milk with extra protein.

Milk producers have also revamped their marketing campaigns to focus on the genuine taste and benefits of natural cow's milk and to show its superiority over alternative products made of soy or almond, calling them "imitation milk."

Despite milk processors' efforts, sales are going down and one of the key reasons for that is the rise in the product's retail price, driven up by increased costs for grains, used to feed cows. This year, however, the drop in sales has been more significant even though in 2012 there's been a smaller rise in prices.

According to figures from Dairy Management, the only category that registered a growth in sales volume this year was organic milk, but this only accounts for four percent of the total milk retail sales. In contrast, to date in 2012 sales of the full range of liquid milk, including non-dairy products, have dropped 2.9 percent from the previous year, and total dollar sales have fallen 2.2 percent, new research from market-research firm SymphonyIRI Group Inc. revealed. The largest milk category, skimmed and low-fat milk, has registered a four-percent decline.